Mining News

Asbestos subsidies: Canadian taxpayers should not be required to subsidize uneconomic activities

Op-Ed by Alana Wilson,Senior Research Analyst with the Global Centre for Mining Studies at the Fraser Institute.

Canada’s mining industry is globally competitive, and has long succeeded without much in the way of government subsidies. It even thrived in the last recession by responding to market demand. Yet, instead of letting markets drive mining investment in Quebec, the Charest government is bailing out the asbestos industry using taxpayer money and this for a product that is losing its market due to human health concerns1.

In recent years, market demand for chrysotile asbestos2 shrunk dramatically which lead to a halt of chrysotile mining in Canada. But instead of letting mines stay closed, taxpayer funds are now being used to gamble against markets on an unprofitable chrysotile mine.

Quebec Premier Jean Charest recently approved a $58 million dollar loan to allow the closed Jeffrey asbestos mine to reopen (Québec, 2012a). This follows months of negotiation and several extensions of the government loan offer to give private partners more time to raise funds (Québec, 2012b). The Quebec government—and taxpayers across Canada whose federal transfer dollars end up in Quebec’s budget—will now provide financing for two-thirds of the cost to renovate the mine.

Even before this bailout was announced, the mine struggled and operated infrequently (Topf, 2011). All other Canadian asbestos mines have closed; the last shuttered in November 2011 (Jamasmie, 2012). In January, LAB Chrysotile Inc., the other remaining asbestos miner in Quebec, filed for bankruptcy (Jamasmie, 2012).

The demise of Canada’s asbestos industry reflects a declining global demand for asbestos driven by health concerns. The World Health Organization (WHO) estimates that 107,000 people die each year from asbestos-related lung cancer, mesothelioma, and asbestosis from exposure to asbestos in their workplace. Although chrysotile—the type of asbestos mined in Quebec—is relatively less harmful than other types and it’s health risks can be reduced by limiting exposure and through controlling its use (Health Canada, 2008; Office of the Auditor General of Canada, 2006).

Even if chrysotile can be safely mined and handled in Canada, the European Union and more than 40 countries have deemed it too dangerous and have banned its use (WHO, 2006). Whether or not the health concerns are real, the global market has shrunk. Taxpayers should not be required to subsidize uneconomic activities with declining demand.

Yet governments refuse to stop spending our money. Between 1984 and 1997, Ottawa provided nearly $20 million dollars to the Chrysotile Institute, a not-for-profit organization that provides training and promotes the use of chrysotile internationally (Office of the Auditor General of Canada, 2006). The Institute received $250,000 per year from the government and collected an additional $10,000 per year for representatives to attend workshops and conferences in support of the chrysotile industry (Office of the Auditor General of Canada, 2006). The federal government also spent an estimated $575,000 in an unsuccessful case to have the World Trade Organization overturn France’s ban on asbestos (Office of the Auditor General of Canada, 2006).

Aside from this federal support, Quebec provided $200,000 per year to the Chrysotile Institute from 2006 to 2011 (Québec, 2012c). However, both levels of government have since cut off funding for the Institute and, like asbestos mining itself, the Institute appears unable to continue without government support. In April it announced its intention to dissolve (Canada Gazette, 2012).

Those who support the bailout of the Jeffrey mine claim up to 500 full-time jobs will be created (Topf, 2011). This works out to an average of more than $115,000 per job. However, the notion that jobs are created is a myth. For one thing, the subsidy comes from other taxpaying businesses and individuals. Such corporate welfare merely recycles tax dollars from other sectors and thus weakens job creation in those same sectors.

The subsidy is even more absurd in light of the labour shortage faced by the global mining industry (Deloitte, 2010; Ernst & Young, 2011). Canadian mining companies need tens of thousands of workers to fill vacancies and meet new demand (MiHR, 2011). By subsidizing mine workers to remain at the Jeffrey mine, public money is being used to distort the labour market and provide incentives for workers to remain in an uncompetitive mine while positions are vacant elsewhere.

Canada has been blessed with many natural resources. It competes globally and does so by responding to market opportunities. In doing so, it prompts innovations and new technologies for more economical, safe, and environmentally sound mining. While governments clearly have a role to play in creating the regulatory framework and stable policies to attract mining investment, its role should not be to use public funds to prop up a failing product.

1The inhalation of asbestos fibres can cause asbestosis, lung cancer, and mesothelioma. Exposure to health risks is primarily occupational and relates to inhalation during mining, manufacturing, construction and renovation activities.

2There are two broad mineralogical groups for commercial asbestos fibres: serpentine (chrysotile) and amphibole (tremolite, actinolyte and others). Chrysotile is different from amphiboles chemically and structurally, and it is generally accepted that chrysotile asbestos is less damaging to the lungs than the amphiboles (Source: Health Canada (2008), Health Risks of Asbestos.)